Philip Morris International Inc. | 2013 | FY | 3


Segment Reporting:
PMI’s subsidiaries and affiliates are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Reportable segments for PMI are organized and managed by geographic region. PMI’s reportable segments are European Union; Eastern Europe, Middle East & Africa; Asia, and Latin America & Canada. PMI records net revenues and operating companies income to its segments based upon the geographic area in which the customer resides.
PMI’s management evaluates segment performance and allocates resources based on operating companies income, which PMI defines as operating income, excluding general corporate expenses and amortization of intangibles, plus equity (income)/loss in unconsolidated subsidiaries, net. Interest expense, net, and provision for income taxes are centrally managed; accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management. Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 3. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.
Segment data were as follows:
 
For the Years Ended December 31,
(in millions)
2013
 
2012
 
2011
Net revenues:
 
 
 
 
 
European Union
$
28,303

 
$
27,338

 
$
29,768

Eastern Europe, Middle East & Africa
20,695

 
19,272

 
17,452

Asia
20,987

 
21,071

 
19,590

Latin America & Canada
10,044

 
9,712

 
9,536

Net revenues(1)
$
80,029

 
$
77,393

 
$
76,346

Earnings before income taxes:
 
 
 
 
 
Operating companies income:
 
 
 
 
 
European Union
$
4,238

 
$
4,187

 
$
4,560

Eastern Europe, Middle East & Africa
3,779

 
3,726

 
3,229

Asia
4,622

 
5,197

 
4,836

Latin America & Canada
1,134

 
1,043

 
988

Amortization of intangibles
(93
)
 
(97
)
 
(98
)
General corporate expenses
(187
)
 
(210
)
 
(183
)
Less:
 
 
 
 
 
Equity (income)/loss in unconsolidated subsidiaries, net
22

 
17

 
10

Operating income
13,515

 
13,863

 
13,342

Interest expense, net
(973
)
 
(859
)
 
(800
)
Earnings before income taxes
$
12,542

 
$
13,004

 
$
12,542



(1) Total net revenues attributable to customers located in Germany, PMI’s largest market in terms of net revenues, were $7.8 billion, $7.7 billion and $8.1 billion for the years ended December 31, 2013, 2012 and 2011, respectively.











55

 
For the Years Ended December 31,
(in millions)
2013
 
2012
 
2011
Depreciation expense:
 
 
 
 
 
European Union
$
190

 
$
181

 
$
210

Eastern Europe, Middle East & Africa
227

 
211

 
227

Asia
277

 
315

 
358

Latin America & Canada
85

 
84

 
90

 
779

 
791

 
885

Other
10

 
10

 
10

Total depreciation expense
$
789

 
$
801

 
$
895

Capital expenditures:
 
 
 
 
 
European Union
$
480

 
$
391

 
$
382

Eastern Europe, Middle East & Africa
247

 
197

 
133

Asia
317

 
277

 
208

Latin America & Canada
156

 
127

 
140

 
1,200

 
992

 
863

Other

 
64

 
34

Total capital expenditures
$
1,200

 
$
1,056

 
$
897


 
At December 31,
(in millions)
2013
 
2012
 
2011
Long-lived assets:
 
 
 
 
 
European Union
$
3,403

 
$
3,065

 
$
2,938

Eastern Europe, Middle East & Africa
1,265

 
1,215

 
1,094

Asia
1,758

 
1,824

 
1,681

Latin America & Canada
759

 
719

 
678

 
7,185

 
6,823

 
6,391

Other
208

 
139

 
146

Total long-lived assets
$
7,393

 
$
6,962

 
$
6,537



Long-lived assets consist of non-current assets other than goodwill; other intangible assets, net; deferred tax assets, and investments in unconsolidated subsidiaries. PMI’s largest market in terms of long-lived assets is Switzerland. Total long-lived assets located in Switzerland, which is reflected in the European Union segment above, were $1.1 billion, $1.1 billion and $1.0 billion at December 31, 2013, 2012 and 2011, respectively.
Items affecting the comparability of results from operations were as follows:

Asset Impairment and Exit Costs - See Note 5. Asset Impairment and Exit Costs for a breakdown of asset impairment and exit costs by segment.
Acquisitions and Other Business Arrangements - For further details, see Note 6. Acquisitions and Other Business Arrangements.

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